Edible Vancouver Island November/December 2023

2023 Food and Beverage Report: Mid-year update

Margins are looking to be lower in 2023 Food and beverage manufacturing margins have been under pressure since 2019, and 2023 will be no different. Beverage margins will struggle more than food, with margins nearly 50% lower than in our base year 2019 (Figure 2).

Six months after our 2023 Food and Beverage Report was published, we look at how food and beverage manufacturers have performed so far this year, provide forecasts for the remainder of 2023 and early 2024, and highlight trends to watch moving forward. Inflation driving strong sales growth in H1 2023 Sales numbers for the first half of 2023 (H1) were steady, with an increase of 8.4% for food manufacturing and 7.3% for beverage manufacturing compared to the same period in 2022 (Table 1).

Table 1: Food manufacturing sales are up in the first half of 2023

Index of gross margin % of revenue (2019 = 100)

120

100

88.6

Table 1: Food manufacturing sales are up in the first half of 2023

80

2023

2024

54.9

60

H1

H2f

H1f

40

$, BILL.

%, Y/Y

$, BILL.

%, Y/Y

$, BILL.

%, Y/Y

20

Food and beverage

80.6

8.3 84.0

2.7 82.4

2.2

0

Food

73.2

8.4 75.6

2.1 74.3

1.6

2018 2019 2020 2021 2022 2023f

2018 2019 2020 2021 2022 2023f

Food

Beverage

Bakery and tortilla products

8.5

16.2 9.2

6.6 9.1

7.2

Source: FCC Economics, Statistics Canada

Dairy products

8.9

6.6 9.5

4.5 9.5

7.0

Fruit and vegetable preserving and specialty food

5.2

11.3 5.5

1.8 5.4

2.5

Trends to watch Softening labour markets

Grain and oilseed milling

10.9

15.4 9.6 -12.0 9.4 -13.9

Meat products

19.6

5.2 20.1

0.9 19.8

1.2

The job vacancy rate for food manufacturing and food wholesalers is in line with pre-pandemic averages. Wage growth remains an issue for employers. Foodservice demand Earlier this year, real (i.e., inflation-adjusted) spending on food services returned to pre-pandemic levels. With an economic slowdown occurring, this type of discretionary spending will struggle to grow. It could even contract if the slowdown turns into a recession. Slowing global economic growth Exports are still strong in 2023, though lower than the last two years. Any global slowdown – particularly in the U.S., Canada’s largest agri-food trading partner – will impact export sales opportunities.

Seafood preparation

3.0

-1.8 3.2

15.2 3.5

15.6

Sugar and confectionary products

2.7

10.1 2.8

2.0 2.5

-6.9

Beverages

7.4

7.3 8.4

8.6 8.0

8.1

Soft drinks

2.5

13.7 2.6

3.1 2.7

9.2

Breweries

3.5

8.1 4.0

9.7 3.8

10.7

Distilleries

0.7

13.1 0.8

27.9 0.7

4.0

Wineries

0.8 -14.1 1.0 -20.0 0.8

-2.4

Sources: Statistics Canada, FCC Economics

These are nominal sales numbers, meaning they do not account for inflation. When accounting for inflation, growth for food manufacturers in H1 was 1.0% and -2.6% for beverage manufacturers. Considering the large increase in nominal sales in H1, we see 2023 sales for the food and beverage sector at $164 billion (5.4% growth).

For additional forecasts and commentary, read our full mid-year review at fcc.ca/Economics

Graeme Crosbie, Senior Economist